“There are three ingredients in the good life: learning, earning, and yearning.”
—Christopher Morley

Bread is a common food source throughout the world and has been a staple of human diets throughout the ages. It comes in multifarious shapes, sizes, and flavors. I enjoy all kinds of bread and delight in any meal that includes a Bagel, Baguette, Boule, Breadstick, Brioche, Ciabatta or Focaccia. I like a chewy crust, an open crumb, and a moderately soft interior. I am addicted to Panera’s Asiago Cheese bagels!

The dictionary definition of bread is “a usually baked and leavened food made of a mixture whose basic constituent is flour or meal.”¹

What amazes me about bread is that all its various forms are made from roughly the exact same stuff.

“The basic ingredients in bread are flour, liquid (usually water, milk, or fruit juice), salt, shortening and sweeteners. Each performs a specific task.”²

Bread Ingredients
Each of the building blocks of a great bread are essential and serve a specific function:

• Flour: Provides the principal dough component and gives the bread the unique flavor of the grain used.
• Liquid: Causes the bread to release the gluten in the flour protein, thereby stretching the dough and making it resilient.
• Yeast: Adds flavor, but importantly, yeast leavens (lightens) the dough, and stimulates rising by forming carbon dioxide gas bubbles as it ferments.
• Salt: Controls the rising action of the yeast and also enhances the flavor.
• Shortening: makes the bread tender and enhances freshness.
• Sugar, honey, molasses, and other sweeteners: Provide energy for the yeast, add flavor, and link with the protein to form the bread`s brown crust.

Point: Based on the exact same ingredients (with each ingredient serving specific purposes) all the different types of bread ensue from the way the ingredients are mixed, handled and baked.

Financial Plan Ingredients
A financial plan is similar to making bread. All people who operate from a financial plan share the same general ingredients. The plan begins with a person’s current money situation, including existing assets, liabilities, indebtedness, net worth, income, budget, financial risks, and long term monetary goals.

Each of the ingredients of a financial plan are essential, and they individually serve distinct purposes:

• Financial goals: Just as a baker decides ahead of time what kind of bread to bake, so too a person must seriously consider what she wants to accomplish with her money. The most valuable asset that any person has is time. There are financial goals that are short term (buying a new car), medium term (paying off debt), and long term (a comfortable retirement). The unique nature of these durations requires specific planning and tailored funding.
• Net worth: Just as a baker begins with a full measure of flour, so each person needs to establish a financial baseline, so he should determine his net worth. He first makes a list of all his assets (qualified plan balances, bank and investment accounts, real estate) and secondly, he needs to add up all his debts (credit cards, mortgages, student loans). His assets minus his liabilities equals his net worth. Net worth is an integral factor in establishing both urgency and risk tolerance.
• Budget and cash flow: A person’s spending habits, giving patterns, obligations, and the ongoing results of past decisions all converge to create total monthly expenses. She must record each expenditure and then assess them as to whether they are must-have items such as groceries and rent, or nice-to-have items such as sport betting. Cash flow is to financial goals what yeast is to gluten. For assets and net worth to grow toward financial objectives, there must be investable cash.
• Emergency funds: If a person is without an emergency fund, she may be forced to rely on high-interest credit cards, drain her 401(k), or take out a loan to afford the unexpected expenses of a sudden financial need. Just as salt acts as a yeast inhibitor, emergencies can negatively impact her long term financial security.
• Insurance coverage: Just as bread requires a heat source in order for the mixture of ingredients to cohere into bread, financial goals require consistent income sources and protection against disruption in order to be accomplished. Insurance is an important part of protecting herself and/or her loved ones in the face of the financial downside of her illness, disability, or death.
• Investments and savings: A person’s saving and investment strategy should be designed based on his personal and family goals, the time frame and his risk tolerance. His clearly defined goals will help him determine how much needs to be invested, how to invest it, and the amount of risk he is willing to take. Just as sweeteners, nuts, and seeds can turn any bread into a delectable treat, the proper portfolio of investments can become the bells and whistles of a successful financial life, including a secure retirement.

Point: A sound financial plan matches realism with dreams, practicalities with reasonable risk, and frequently reviewed strategies with well thought out goals. The result is a sweet-smelling, satisfying financial life.

Independent Financial Professionals as Bakers
There is a very useful formula used by bakers. Some call it the “golden ratio.” The formula specifies the proportional weight of the four essential ingredients: Flour, water, salt, and yeast. Assuming the total amount of flour is 100 percent, the proportion of each ingredient is as follows: Liquid = 60 percent, Salt = two percent, and Yeast = one percent. Additionally:

• The weight ratio of flour to liquid is normally five to three.
• The weight of salt is normally two times that of instant yeast.

After a baker has selected the ideal flour for her bread, there are a few more elements that make a good loaf of bread even better.

When selecting water to add to the recipe, bakers know the following:

1. Hard water will toughen the dough and slow fermentation.
2. Very soft water will soften the dough, making it sticky.
3. Some tap water has an unpleasant taste such as from sulfur.
4. Distilled water is no good because some minerals are needed for good texture and flavor.
5. It is best to use bottled mineral water.
6. The best bread recipes call for fresh or active dry yeast mixed into warm water.
7. Direct contact with salt (without flour to buffer it) will kill yeast, so good bakers always mix the yeast into the flour before adding salt to dough.
8. The best bakers use non-iodized salt such as sea salt because iodized versions can impart an unpleasant flavor. They know that fine salt is better than coarse because it is easier to measure.

Similar to great bakers, the best independent financial professionals (IFPs) create recipes for financial success for their clients. The ingredients look like those of any story because that is the IFP’s role: Help clients write their financial story. These ingredients are as follows:

• Who is dependent on you now or will be a part of your life in the future?
• What will you hope to be doing in the coming years?
• Where will you live and work?
• When do you hope to enjoy the fruits of your labor?
• How will you take care of your loved ones and dependents should anything happen to you?
• Why are you accumulating wealth and why do you spend money the way you do?

IFPs frequently direct their clients to proven formulas, measures, and benchmarks. Consider the following:

1. A person should spend 28 percent or less of her monthly gross income on her mortgage.
2. A prudent person puts away at least three to six months’ worth of expenses in an emergency fund.
3. The person who wants to be responsible usually owns life insurance equal to 10-15 times her current income.
4. People in their 20s should save 10-15 percent of their pre-tax income. If they wait until they are in their 30s this should be increased to 15-20 percent of their pre-tax income. Those who waited until their early 40s should set aside 25-35 percent of their pre-tax income.
5. People looking forward to retirement should plan on needing 70 percent of their pre-retirement yearly salary to live comfortably.
6. When a person retires, she should add up all of her investments, and withdraw four percent of that total during her first year of retirement. In subsequent years, she can adjust the dollar amount she withdraws to account for inflation.

Point: Just as bakers use learned techniques, their experience, and collective wisdom through the ages to create amazing bread, so also do great IFPs use their training, education, experience, proven techniques, known success patterns, and recognized guidelines to guide their clients through their financial lives.

Summary
Has a smell ever made you remember a specific event or time in your life? Many people smell fresh bread and are immediately transported back in time to a grandmother, mom, or favorite bakery. “Odors have the exceptional ability to instantaneously trigger vivid autobiographical memories—a phenomenon referred to as the Proust effect.”³

In his masterpiece novel, “Remembrance of Things Past: Volume I – Swann’s Way,” Marcel Proust wrote: “When nothing else subsists from the past, after the people are dead, after the things are broken and scattered…the smell and taste of things remain poised a long time, like souls…bearing resiliently on tiny and almost impalpable drops of their essence, the immense edifice of memory”⁴

Similarly, the work that an IFP does with clients will long be remembered for the impact on people living comfortably in retirement, sending their children to college, paying off mortgages, leaving behind a financial legacy, and having protection from financial risk of loss from illness, disability, and death.

IFPs can help their clients enjoy the sweet fragrance of the three ingredients of the good life: Learning, earning, and yearning.

Sources:

1. https://www.merriam-webster.com/dictionary/bread.
2. https://www.chicagotribune.com/news/ct-xpm-1985-01-24-8501050406-story.html.
3. https://web.colby.edu/cogblog/2015/11/22/smelling-your-memories-the-positive-and-negative-of-the-proust effect/#:~:text=Odors%20have%20the%20exceptional%20ability,as%20those%20related%20to%20smells.
4. Swann’s Way (À la recherche du temps perdu #1) by Marcel Proust, Lydia Davis (Translator) Published November 30th 2004 by Penguin Classics (first published November 14th 1913).